September 5, 2022
Average Nigerian investors are diversifying their assets in a more secured option while sustaining improved income stream.
This has led to a significant boost in investments through the Mutual Funds where the value of assets has risen by 11.04 per cent to N1.388 trillion in the first half of 2022, HI’22, up from N1.250 trillion in the corresponding period of 2021, H1’21.
Investment analysts have attributed the increasing participation of the retail investors to increased awareness, regulations and monetary policy that had impacted the capital market in recent times.
Mutual Fund is a professionally managed investment window that pools money from many investors to purchase securities such as stocks, bonds, and short-term debt.
Analysis of the Mutual Funds investment show that the Money Market Funds led other Funds recording N582.296 billion and accounting for 41.93 per cent of the total value.
It was followed by Bond/Fixed Income Funds recording N407.264 billion, while Dollar Fund occupied the third position on the chart posting N284.299 billion.
Reacting to the improvement in Mutual Funds, Analyst and Vice Executive Chairman, HighCap Securities Limited, David Adonri, said: “The growth in NAV (Net Asset Value) of Mutual Funds is impressive but it underperformed the equities market which grew by 21% within H1’22.
‘‘Unfortunately, when annualized, the performance is a negative return when compared to inflation rate. It is around the same range as average yield on bonds which means that the funds were managed conservatively. They may have been weighted more towards debt.”
Benefits of Mutual Funds
On its viability in the financial sector, he said: “The future of Mutual Funds in comparison with other financial instruments is reasonably bright. They have their captive market which is the retail investment market.
‘‘Additionally, Mutual Funds are plentiful and structured to meet the differentiated needs of investors. Each Fund targets the risk tolerance of its investor group. Their usefulness as portfolio diversification tool is unmatched in the capital market. They deal reasonably well with unsystematic risks and hence reliable tool for risk management. They are generally for passive investors.”
Reacting to this development, Analyst and Head of Research and Investment at Fidelity Securities Limited, Victor Chiazor, said: “Investment in mutual funds has over the years continued to increase especially as more investors become aware of the options this asset class provides. Going by the fact that mutual funds invest in various asset classes and are managed by professionals, investors are becoming more comfortable around the idea of investing their funds in any mutual fund that meets their investment needs, be it an equity fund, fixed income fund or a balanced fund. The increase in net asset is as a result of the options which have become available to investors.”
“Before now, mutual funds were a bit narrow and less understood by the market. As awareness increases we have seen a rise in fund flow towards this asset class and in the medium term we expect this asset class to grow significantly especially given that the asset class is more liquid than other competing investments in the financial markets.”
In his own reaction, an investment banker/chartered stockbroker, Tajudeen Olayinka, said: “11.04% performance by Mutual Funds as at June, 2022 (year to date), was simply a reflection of general performance of securities market in Nigeria as of that date. Given that equity market did much better than 11.4% (year to date), as at June, 2022, indicates that collective performance of Mutual Funds in Nigeria was below the performance of the of equity market, but within the average yield in the fixed income space as of that date.
‘‘The performance of Mutual Funds in Nigeria has further corroborated the argument around the market that fund managers tend to concentrate their holdings on fixed income securities, as against equity, perhaps, because of the usual volatility associated with equity market in Nigeria.
‘‘Since 11.04% was above average interest rate paid on savings deposit in Nigeria, it goes to suggest that the expectation of average retail investor must have been met.”
On the future of the Fund, he said: “The future of Mutual Funds in Nigeria is positive, in that more retail investors who desire to enjoy stable portfolio performance, are expected to join the club. It is a positive development for the market.”
